92 Decision Citation: BVA 92-21232
Y92
BOARD OF VETERANS' APPEALS
WASHINGTON, D.C. 20420
DOCKET NO. 91-51 861 ) DATE
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THE ISSUE
Entitlement to waiver of loan guaranty indebtedness.
ATTORNEY FOR THE BOARD
J. W. Engle, Associate Counsel
INTRODUCTION
The appellant served on active duty from December 1960 to
January 1988.
This matter came before the Board of Veterans' Appeals (the
Board) on appeal from a rating decision on March 19, 1990,
from the Committee on Waivers and Compromises of the
Honolulu, Hawaii, Regional Office (VARO). The appellant was
notified of that decision on March 29, 1990. The notice of
disagreement was received on May 7, 1990. The statement of
the case was issued on June 6, 1990. The substantive appeal
was received on September 16, 1991. The case was received
at the Board on December 20, 1991.
The validity of the loan guaranty indebtedness is not in
dispute. Carlson v. Derwinski, 1 Vet.App. 144 (1992);
Schaper v. Derwinski, 1 Vet.App. 430 (1991). There had been
no transfer by the veteran of the property subject to the VA
loan guaranty prior to default, warranting consideration of
a retroactive release of liability. 38 U.S.C.A. § 3713(b);
38 C.F.R. § 36.4323(g); Schaper, 1 Vet.App. at 432.
The Committee on Waivers and Compromises determined that
there was no fraud, misrepresentation or bad faith involved
in the creation of the indebtedness; however, they concluded
that collection of the outstanding indebtedness would not be
against the principle of equity and good conscience.
CONTENTIONS OF APPELLANT ON APPEAL
The appellant contends that collection of the loan guaranty
indebtedness should not be insisted upon since he had no
control over the circumstances which led to the creation of
the indebtedness.
DECISION OF THE BOARD
In accordance with the provisions of 38 U.S.C. § 7104
(1992), following review and consideration of all relevant
evidence and material of record in the appellant's claims
folder and loan guaranty file, and for the reasons and bases
hereinafter set forth, it is the decision of the Board that
it would not be against equity and good conscience to
require payment of the loan guaranty indebtedness.
FINDINGS OF FACT
1. The appellant served on active duty from December 1960
to January 1988.
2. All relevant evidence necessary to an equitable
disposition of the appeal has been obtained by VARO.
3. The appellant obtained a home loan in the amount of
$109,900.00 on September 27, 1984, which was secured, in
part, by VA loan guaranty.
4. A notice of default was received by VA on January 20,
1987, which noted the default was November 1, 1986.
5. The evidence of record reflects that the default was
cured on July 14, 1987.
6. A notice of default was received by VA on December 16,
1988, which noted an uncured default on October 1, 1988.
7. A notice of intention to foreclose was received by VA on
January 18, 1989.
8. A compromise agreement and acknowledgment of VA
indemnity liability were executed by the appellant in April
1989. The property was sold in April 1989, which sale
resulted in a $6,658.55 deficiency.
9. The $6,658.55 deficiency was paid to the holder under
the terms of the loan guaranty and subsequently charged to
the appellant pursuant to the acknowledgment of VA indemnity
liability.
10. Recovery of the outstanding loan guaranty indebtedness
from the appellant would not be inequitable.
CONCLUSION OF LAW
Recovery of the outstanding loan guaranty indebtedness is
not contrary to the principle of equity and good
conscience. 38 U.S.C. § 5302 (1992); 38 C.F.R. § 1.965(a)
(1992).
REASONS AND BASES FOR FINDINGS AND CONCLUSION
Initially, we note that the appellant's claim is
well-grounded within the meaning of 38 U.S.C. § 5107(a)
(1992). We are also satisfied that all relevant facts have
been properly developed.
The principle of equity and good conscience will be applied
when the facts and circumstances in a particular case
indicate a need for reasonableness and moderation in the
exercise of the Government's rights. The decision reached
should not be unduly favorable or adverse to either side.
The phrase "equity and good conscience" means arriving at a
fair decision between the obligor and the Government. In
making this determination, consideration will be given to
the following elements, which are not intended to be all
inclusive:
(1) Fault of debtor. Where actions of the debtor
contribute to creation of the debt.
(2) Balancing of faults. Weighing fault of debtor
against Department of Veterans Affairs fault.
(3) Undue hardship. Whether collection would deprive
debtor or family of basic necessities.
(4) Defeat the purpose. Whether withholding of benefits
or recovery would nullify the objective for which benefits
were intended.
(5) Unjust enrichment. Failure to make restitution
would result in unfair gain to the debtor.
(6) Changing position to one's detriment. Reliance on
Department of Veterans Affairs benefits results in
relinquishment of a valuable right or incurrence of a legal
obligation. (38 U.S.C. § 5302 (1992)).
The appellant obtained a home loan on September 27, 1984 in
the amount of $109,900.00, which was secured, in part, by
VA. In January 1987 a notice of default was received by
VARO which noted that the first uncured default was on
November 1, 1986. It was subsequently noted that the
default was cured by the appellant on July 14, 1987. In
December 1988, VARO received a notice of default which
indicated a default on October 1, 1988. On January 18, 1989
a notice of intention to foreclose was received by VARO. It
was noted that contact had been made with the appellant and
that he indicated that the property was listed with a
realtor for sale. In April 1989, a compromise agreement was
entered into and the appellant executed an acknowledgment of
VA indemnity liability. The property was sold in April
1989, which sale resulted in a $6,658.55 deficiency which
was paid to the holder by VA. The $6,658.55 deficiency was
subsequently charged to the appellant pursuant to the
compromise agreement and acknowledgment of VA indemnity
liability.
The appellant contends that his transfer from Hawaii to
California on short notice due to the deactivation of his
unit caused the default and subsequent loan guaranty
indebtedness. He argues that he was forced to lease the
subject property at a considerable loss which eventually
resulted in default. In a statement received in September
1991, the appellant reported that due to the negative cash
flow in 1987 and 1988, he was used personal income and
credit cards to offset the mortgage payments on the subject
property and incurred a large credit card debt as a result.
After review of the evidence of record, we find no
circumstance that would relieve the appellant of his
responsibility with respect to the mortgage obligation. By
entering into the compromise agreement, the appellant was
allowed to avoid the credit damage and added expense of a
foreclosure. Although he argues that his transfer to
another duty station caused the default, he maintained the
mortgage payments for approximately two years after the
transfer. While the default apparently coincided with the
appellant's retirement from the service, he reported on his
Financial Status Report, received in December 1989, that he
was employed at his present job within 30 days after service
separation. Furthermore, during that time period, the
appellant incurred a significant amount of consumer debt
which was unrelated to the subject property. The reported
debts clearly impaired the appellant's ability to meet his
mortgage obligation on the subject property and further
reflect a degree of control by the appellant with respect to
the circumstances surrounding the creation of the loan
guaranty indebtedness. Accordingly, we find some degree of
fault on the appellant's part with respect to the creation
of the loan guaranty indebtedness.
Since we have determined that the appellant had some degree
of control with respect to the circumstances surrounding the
creation of the loan guaranty indebtedness, we must now
determine if recovery of the outstanding indebtedness would
result in undue financial hardship.
The Financial Status Report dated in December 1989 indicates
that the appellant's monthly income exceeds his monthly
expenses by approximately $104.29. In addition, the
majority of the consumer debt and installment contracts are
short-term in nature and should be paid in full in several
years. In view of the above, we believe that recovery of
the outstanding indebtedness would not be contrary to the
principle of equity and good conscience. Based on the
financial information supplied, we believe that the
appellant is able to pay the indebtedness of $6,658.55, plus
accrued interest, if payments are made on a monthly basis
over a period of five years.
Accordingly, waiver of the loan guaranty indebtedness is in
not order based on the standard of equity and good
conscience. 38 C.F.R. §§ 1.964(a)(2), 1.965(a) (1991).
ORDER
Waiver of recovery of loan guaranty indebtedness is denied.
BOARD OF VETERANS' APPEALS
WASHINGTON, D.C. 20420
*
(Member temporarily absent) MATTHEW J. GORMLEY, III
KENNETH R. ANDREWS, JR.
*38 U.S.C. § 7102 (1992) permits a Board of Veterans'
Appeals Section, upon direction of the Chairman of the
Board, to proceed with the transaction of business
without awaiting assignment of an additional Member to
the Section when the Section is composed of fewer than
three Members due to absence of a Member, vacancy on
the Board or inability of the Member assigned to the
Section to serve on the panel. The Chairman has
directed that the Section proceed with the transaction
of business, including the issuance of decisions,
without awaiting the assignment of a third Member.
NOTICE OF APPELLATE RIGHTS: Under 38 U.S.C. § 7266 (1992),
a decision of the Board of Veterans' Appeals granting less
than the complete benefit, or benefits, sought on appeal is
appealable to the United States Court of Veterans Appeals
within 120 days from the date of mailing of notice of the
decision, provided that a notice of disagreement concerning
an issue which was before the Board was filed with the
agency of original jurisdiction on or after November 18,
1988 (see § 402 of the Veterans' Judicial Review Act
(Pub. L. 100-687)). The date which appears on the face of
this decision constitutes the date of mailing and the copy
of this decision which you have received is your notice of
the action taken on your appeal by the Board of Veterans'
Appeals.